The International Monetary Fund (IMF) has urged the British government to remain vigilant regarding inflation, although it said that UK macroeconomic performance remains "impressive".
In its 2006 Article IV consultation review of the UK's economy, the international organisation commended the government for tightening monetary policy and said that business investment was boosted by high net rates of return.
While this is good news for financial executives around the country, the IMF did warn that increases in inflation and the current account deficit "need to be watched as possible signs of capacity constraints". High house prices were also seen to be a vulnerability that should be closely monitored.
Monetary policy 'well-positioned'
The body said that "monetary policy is well-positioned to respond to shocks", and said that in the immediate future the importance of wage restraint should continue to be communicated in order to minimise the need for additional increases in interest rates.
IMF directors said "the financial sector continues to thrive and linkages with financial systems in other countries continue to grow. Net exports of financial services have risen steadily over the past decade and increased sharply in recent years".
Meanwhile the latest Lloyds TSB Corporate Markets business barometer shows that companies in the UK are confident about their prospects this year.
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